REPORT FROM THE BOARD OF DIRECTORS 2017/2018

Transcription

1 26 April 2018

2 REPORT FROM THE BOARD OF DIRECTORS 2017/ Background and history ECOHZ AS was founded on 8 October Originally named Enviro Energi ASA, the company changed its name to ECOHZ ASA in February 2007, and changed legal form to a limited company (AS) at an Extraordinary General Meeting on 11 October The company s business ECOHZ business concept is to offer documented renewable energy to electricity suppliers, businesses and organisations. In 2017, independently and through international partners, ECOHZ continued to develop its global catchment area, with the main aim of delivering an end-to-end portfolio to international businesses. In addition to supplying Guarantees of Origin (GO) in Europe, the company delivers renewable electricity with documented RECs in the USA, and International RECs (I-RECs) in a steadily growing number of international markets. In 2015, ECOHZ made history by becoming the first company to sell and deliver I-RECs. In the year under review, ECOHZ consolidated its position, and established a wide portfolio of certified power plants and partners located in Asia, Central and South America, the Gulf region and parts of Africa. In 2017, ECOHZ sold and delivered a total volume of 62 TWh, which was up significantly on the previous year s figure of 55 TWh. The main proportion of sales relate to European Guarantees of Origin, while a smaller percentage of sales derive from RECs in the USA and I-RECs. However, the I-REC market is rapidly expanding, and in 2017 ECOHZ achieved a global market share of around per cent in this market. The continued use of fossil fuels to generate electricity is contributing to an increase in both local and global greenhouse gas emissions, and thus to global warming. Viewed in a climate change context, energy consumption frequently represents businesses largest single contribution to greenhouse gas emissions. Electricity generated from renewable energy sources such as hydropower, solar power, wind power, geothermal heating, and biomass play an important role in reversing this situation. ECOHZ documents that the electricity is generated from renewable energy sources. ECOHZ also guarantees that payments for electricity with Guarantees of Origin go to the producers, thus giving them an incentive to continue to develop and increase their production of renewable energy was a breakthrough year for the company s new and innovative product GO 2. This product is based on Guarantees of Origin, and links payment flows directly with the financing of new power plants. GO 2, which has earned recognition from prominent stakeholder organisations, is aimed at large businesses looking to extend their commitment beyond purely purchasing documented renewable energy. ECOHZ has established a portfolio of renewable projects based in Norway, Sweden and selected European markets, and in 2017, completed its first power plant financed through GO 2. Tågeröd, a Swedish wind power plant with planned annual production of 18 GWh, delivered its first electricity to the grid in January Sandvik, a small Norwegian hydropower plant was commissioned in March, and it delivers renewable power to the Norwegian power network. In 2017, ECOHZ established a new area of expertise in Power Purchase Agreements (PPAs) on the back of close dialogue between several large businesses. While the main purpose of the businesses vary, the majority focus on profiling purchases of renewable electricity from a specific new power plant, where Page 2 of 22

3 Guarantees of Origin are a critical component. Many players also focus on adding additionality. The international market for PPAs is generating strong growth, in particular in the USA and parts of Europe. ECOHZ focuses on ensuring increased traceability and improved documentation related to purchases and sales of renewable energy, and has established a varied and extensive product portfolio. The company s portfolio includes Guarantees of Origin, I-RECs and RECs from more than 600 power plants, a high percentage of which are based on fixed supplier agreements with a large number of power producers. While a significant share of the power producers is based in Norway, ECOHZ has steadily expanded its offering of renewable electricity from power plants in the rest of Europe and beyond. The portfolio comprises renewable electricity generated from hydropower, wind power, biomass, solar power and geothermal sources. ECOHZ is constantly expanding the variety of its offering to reflect specific power plants locations, sizes, ages and other characteristics. ECOHZ also offer renewable energy from environmentally certified power plants based on various international standards. While the company s main focus remains firmly on traceability and documentation of renewable electricity, in 2017, ECOHZ made its first foray into the growing business market for renewable biogas, initially from certain selected markets such as the United Kingdom. With more than 100 active partners/resellers in more than 15 countries, the company s distribution strategy is primarily geared to reaching businesses through a reseller network. In parallel with this, ECOHZ has established a clearer profile and sharpened its focus on direct sales and deliveries to major international businesses. ECOHZ is already among Europe s leading companies in the sale and delivery of renewable energy with Guarantees of Origin. With leading, is meant: 1) the largest player in selected markets, 2) a complete end-toend range of products, and 3) high levels of recognition among customers, NGOs and authorities. ECOHZ also actively participates in the Norwegian-Swedish electricity certificate market and has successfully established a stable and clear market position. ECOHZ strategy is underpinned by the establishment and use of professionally documented methods and being acknowledged as reliable, quality-conscious and thorough by the market and relevant expert bodies. The company is actively striving to realise its vision of Changing energy behaviour. ECOHZ three core values of Openness, Trust and Boldness provide an important premise for this. The values strongly influence the company s open and direct dialogue with customers, and they also form the basis for industry-policy initiatives to create a larger and more robust international market for documented renewable electricity. 3. Framework conditions and market development Renewable energy and the climate threat Due to insufficient international political initiative, a great deal of the responsibility for ensuring sound environmental solutions has been indirectly entrusted to individual countries and regions, as well as to ambitious companies and organisations. The importance of identifying solutions that reduce global warming has not diminished. Within this picture, energy is key, and replacing fossil sources with clean, renewable energy sources is absolutely vital. In order for this to be achieved, a broad menu of solutions and instruments both technical and financial is needed. Renewable energy with Guarantees of Origin is one of many such instruments, but one that now is well-established and accepted among European customers and stakeholders in Page 3 of 22

4 International businesses ramping up climate commitment The business community nationally and internationally is increasingly realising that it can contribute to solutions that will help to prevent global warming due to increased greenhouse gas emissions. Renewable energy will be an absolutely pivotal element of this type of solution. In 2015, a cluster of international businesses, CDP and the Climate Group, joined together to establish the RE100 initiative. By the end of 2017, almost 130 leading companies had signed up to the initiative. The companies have announced a shared ambition of using 100 per cent renewable energy in all operations globally. In addition, more than 80 per cent of RE100 businesses aim to realise this ambition by RE100 and several similar initiatives are currently challenging and changing the established energy industry. The authorities too in a number of countries are being forced to revise/accelerate their planned rate of migration from fossil-based to renewable energy. This in turn is generating strong demand for tools and solutions to realise renewable targets. International standards Greenhouse Gas Protocol (GHG-P) is the leading international standard governing presentation of business accounting for greenhouse gas emissions. In 2015, GHG-P published an updated corporate standard for reporting energy consumption, which specifically highlighted the use of Guarantees of Origin, RECs and I- RECs as important for traceability and documentation. This has been of key importance for further demand for documented renewable electricity. CDP (formerly the Carbon Disclosure Project), and several ISO standards, are increasingly being harmonised with GHG-P, and refer to the same use of recognised standards. EU setting the agenda In 2014, the EU adopted new legislation for corporate social responsibility (CSR). The draft legislation imposes extra accounting responsibility, including reporting of energy consumption, on around 6,000 businesses in the EU. The legislation enters into force from Renewable electricity documented with Guarantees of Origin is described as one of a number of measures in the EU s Renewable Energy Directive from The system is being adopted by an increasing number of countries, and a range of initiatives exists to promote increased harmonisation and to strengthen the position of the system. The EU is also currently reviewing how climate and energy policy should be formulated after 2020, and in the period leading up to A framework and target figures for greenhouse gas emissions, renewable energy shares and energy-efficiency improvements were launched back in The EU has also established the Energy Union concept, designed to build a transparent and more dynamic energy market. The Energy Union is an ambitious project, which requires increased coordination at European level. The EU Commission also published its Winter Package in December This outlines how a future energy policy could look in the coming years. The Winter Package contains a revised draft of the EU s Renewable Energy Directive, which deals with issues including the role and scope of Guarantees of Origin. The Commission s proposals were the subject of debate and energy-policy deliberations throughout 2017 both in the EU Parliament and the EU Council. A final Renewable Energy Directive will be adopted in June 2018 at the earliest, before entering into force on 1 January 2021, and will be effective until Growth in the market for electricity with Guarantees of Origin The market for electricity with Guarantees of Origin has continued to post strong growth. This is reflected in both Norwegian statistics and European figures. There was less volatility in the market in 2017 than in previous periods, though prices came under steady pressure throughout the period. Demand for renewable energy with Guarantees of Origin in particular from businesses increased markedly during the year. In overall terms, the market in Europe is around 650 TWh, with EECS Guarantees of Origin sold by AIB Page 4 of 22

5 member countries amounting to just under 475 TWh. Following many years with a surplus of guarantees, the market was more balanced in A similar trend is also noticeable in countries and regions outside Europe, where comparable systems have been established. In these markets too, the largest businesses are responsible for the lion s share of demand. A Norwegian perspective Guarantees of Origin in the Norwegian Energy Report The Guarantees of Origin scheme was the subject of discussion in the Norwegian media, as well as among politicians and other authority holders when the white paper on Energy was presented to the Norwegian Parliament in spring Following the debate, in June 2016, the Storting gave its unequivocal backing to the scheme, and its role in Norwegian and European energy policy. The system is firmly embedded in Norway. With the exception of offshore power generation, more than 98 per cent of Norwegian power is produced from renewable energy sources. In 2017, the total volume of renewable energy generated in Norway amounted to approximately 147 TWh, compared with 145 TWh in Of this volume, 141 TWh was certified as electricity with Guarantees of Origin, and an approximately similar volume was sold in Norway or exported to European markets. Norway is part of the common EU/EEA electricity market, which means that Norwegian power producers are able, through the sale of Guarantees of Origin, to sell the renewable energy to power suppliers and consumers throughout the entire European market. Norwegian electricity suppliers who do not purchase Guarantees of Origin to document their power products are required to refer to the disclosure of the Norwegian residual mix of electricity calculated annually by the Norwegian Water Resources and Energy Directorate (NVE). The disclosure calculation for Norwegian electricity without Guarantees of Origin in 2017 will be published by NVE in June Based on provisional figures, it is estimated that the percentage of renewable energy will remain low. The share of renewable energy of unspecified origin supplied in Norway was 14 per cent in 2016 and 12 per cent in El certificates a joint Norwegian/Swedish market The Norwegian-Swedish joint electricity certificate market has now been operational for six years. The market is characterised by periods of low liquidity, with lengthy periods of extremely low prices. Norway has decided to discontinue participation in this market with effect from Ownership and equity information As of 31 January 2018, the company had the following shareholder structure: Strawberry Equities AS 50.91% TrønderEnergi Kraft AS 12.44% Eidsiva Vannkraft AS 12.44% Nordisk Industriutvikling AS 11.77% (100% Ove Gusevik) Troms Kraft Strøm AS 9.95% (100% Troms Kraft AS) Troms Kraft AS 2.49% Page 5 of 22

6 5. Income statement and balance sheet ECOHZ annual financial statements for 2017/2018 cover the period 1 February 2017 to 31 January Total sales increased from NOK million in 2016/2017 to NOK million in 2017/2018. The net profit for the year came in at NOK 3.1 million in 2017/2018, compared with NOK 5.5 million in 2016/2017. At the reporting date, total assets amounted to NOK 92.1 million, compared with NOK 83.4 million at yearend 2016/2017. At the same date, the equity ratio was 31.4 per cent, compared with 31.0 per cent as of 31 January The company s liquidity position at the balance sheet date is considered to be satisfactory. Total liquidity less restricted funds plus an unutilised overdraft facility of NOK 5.0 million amounted to NOK 10.1 million. Furthermore, the company s total current liabilities of NOK 62.4 million are covered by outstanding trade receivables of NOK 66.8 million. The net cash flow from operating activities closed on NOK -2.3 million, NOK 7.0 million lower than the operating profit for the period. The difference is attributable to net financial items of NOK -1.0 million, payment of taxes of NOK 2.0 million, and changes in trade receivables, trade payables and other accruals and prepayments. In 2013, ECOHZ changed its accounting year-end from 31 December 2013 to 31 January The accounting year was changed in order to improve the quality and accuracy of the annual financial statements and avoid major estimate-based items. The company believes that this in turn will improve the quality of information for users of ECOHZ annual financial statements. The Board is of the opinion that the company satisfies the going concern assumption. 6. Operational risk 94.5 per cent of ECOHZ s total sales are generated in foreign currency. The company s results are subject to only limited foreign exchange risk due to the fact that most purchases and sales are made in the same Page 6 of 22

7 currency, and the fact that the company s suppliers take changes in exchange rates into account when setting prices. In order to reduce the company s credit risk and liquidity risk, the company endeavours to make partdeliveries for large contracts and customers. This permits the company to resell to a greater extent should this be required. The company s development is to a large extent contingent on possessing outstanding expertise in trading, markets and framework conditions for renewable energy and climate issues. 7. Research and development In 2017/2018, ECOHZ did not carry out any activities or investments relating to research or development. 8. Board and employees etc. The Board comprises a total of five members, one of whom is a woman. Two observers also sit on the Board. The company s Managing Director is Tom Lindberg. At the end of the year, the company employed 16 staff, five of whom were women and eleven men. The company s recruitment and salary policies are genderneutral, and the company continually strives to promote equality and equal opportunities among its employees. New staff are recruited on the basis of individual expertise. The company employed 15.1 full-time equivalents in 2017/2018. The company operates its business from leased premises in Oslo and also has a branch in Nyon, Switzerland. 9. Corporate social responsibility and HSE ECOHZ takes social responsibility seriously and believes there to be a clear correlation between the way a company is run and its relationship with society as a whole. The company has an active environmental policy, which is also of importance for the company s external profile. The company does not pollute the external environment through direct emissions but does generate indirect greenhouse gas emissions through business travel, energy consumption and waste management. ECOHZ has an established environmental policy: ECOHZ AS is committed to being a driving force behind activities that minimise environmental impact, locally and globally. ECOHZ shall take special responsibility for communicating by its own actions the need for and benefits of carrying on commercial activities in a sustainable manner. Sustainability shall have a key influence on all decision-making within the organisation. Prioritising sustainability shall secure ECOHZ a long-term competitive advantage and be motivational for customers choice of partner. ECOHZ shall comply with, and where possible exceed, minimum requirements as set out in relevant environmental legislation and regulations. The company has defined targets and action plans covering areas including energy consumption, purchasing and consumption, waste/cleaning and employees business travel. Page 7 of 22

8 In addition, the company purchases renewable power with Guarantees of Origin. The company works actively on health, safety and environment issues (HSE). The company has defined three target areas: 1) acute illness/first aid, 2) the psychosocial environment and 3) fire safety. Regular HSE meetings are held and agreed activities are followed up. The sickness absence rate in 2017/2018 was 5.7 per cent, compared with 1.2 per cent in 2016/2017. Of this, 5.6 per cent was related to long-term sickness absence. 10. Outlook Problems arising from climate change are increasing in scope, and there is a growing recognition that more people need to take responsibility for seeking to solve climate problems. To an increasing extent, this is a question of ethical choice, but it is also an area which impacts on the competitiveness of individual businesses. ECOHZ is very favourably positioned and is experiencing growing demand for Guarantees of Origin from renewable energy. At the same time, the company is attracting increasing attention and experiencing increased competition. The company is in a rapid growth phase and is suitably staffed with highly skilled employees. Consequently, the company is well positioned to continue its positive performance. 11. Appropriation of profit for the year The Board recommends that the Annual General Meeting appropriate the profit for the year as follows: Proposed dividend: NOK 0 Transferred to other equity: NOK 3,064,371 Total appropriations NOK 3,064,371 Date, 26 April 2018 Bente Rathe, Board Chair Kenneth Andersen Ove Gusevik Erling Dalberg Bernhard Kvaal Tom Lindberg Page 8 of 22

9 Income statement for the period 1 February January 2018 ECOHZ AS Note 1 Feb Jan Feb Jan 2017 Sales revenues Other operating revenues Total operating revenues 2, Cost of goods sold 15 ( ) ( ) Salaries and payroll costs 3, 6, 8 ( ) ( ) Depreciation of property, plant and equipment 4 ( ) ( ) Other operating expenses 3, 7, 8, 13 ( ) ( ) Total operating expenses ( ) ( ) Operating profit Other financial income Other financial expenses ( ) (49 700) Profit on ordinary activities before tax Tax expense 10 ( ) ( ) Profit on ordinary activities Profit for the year Transfers Proposed dividend Other equity Total Page 9 of 22

10 Balance sheet as of 31 January 2018 ECOHZ AS ASSETS Note Non-current assets Intangible assets IT and website Deferred tax assets Total intangible assets Property, plant and equipment Tangible operating assets, furniture, etc Total property, plant and equipment Non-current financial assets Investments in shares and shareholdings Total non-current financial assets Total non-current assets Current assets Inventories Receivables Trade receivables Other receivables Total receivables Bank deposits, cash and cash equivalents Total current assets Total assets Page 10 of 22

11 Balance sheet as of 31 January 2018 ECOHZ AS EQUITY AND LIABILITIES Note Equity Paid-in equity Share capital (256,549 shares at NOK 25.00/share) Share premium Total paid-in equity Retained earnings Other equity Total retained earnings Total equity Liabilities Provisions Pension liabilities Total provisions Current liabilities Trade payables Public charges payable Tax payable Proposed divided Other current liabilities Total current liabilities Total liabilities Total equity and liabilities OSLO, 26 April 2018 ECOHZ AS Bente Rathe Ove Gusevik Bernhard Kvaal Chairman of the Board Board member Board member Kenneth Andersen Erling Dalberg Tom Lindberg Board member Board member Managing Director Page 11 of 22

12 ECOHZ AS STATEMENT OF CASH FLOW CASH FLOW FROM OPERATING ACTIVITIES Profit before tax Taxes paid for the period Depreciation, amortisation and impairments Change in inventories Change in trade receivables Change in pension liabilities Change in trade payables Change in other accruals and prepayments Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Payments for investments in property, plant and equipment Net cash flow from investing activities CASH FLOW FROM FINANCING ACTIVITIES Payment of dividends Net cash flow from financing activities Total change in cash and cash equivalents Cash and cash equivalents 1 Feb Cash and cash equivalents 31 Jan Page 12 of 22

13 Note 1 Accounting policies The financial statements are prepared in accordance with the requirements of the Norwegian Accounting Act and generally accepted accounting practice. Use of estimates Preparation of financial statements in accordance with the Norwegian Accounting Act requires the use of estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. Areas which make extensive use of judgements, involve a high degree of complexity, or areas where assumptions and estimates are material to the financial statements are described in the notes. Sales revenues Revenues from the sale of Guarantees of Origin and electricity certificates are measured as the fair value of the consideration received, net of VAT, returns, rebates and other discounts. Sales of Guarantees of Origin and electricity certificates are recognised in income when the company has delivered the products to the customer and there is no unfulfilled obligation that could affect the customer s acceptance of the delivery. Deliveries are not considered to be complete before the products are transferred to the customer, redeemed or put on the customer s account for later redemption and thus the risk is transferred to the customer. Classification of balance sheet items Assets intended for permanent ownership or long-term use are classified as non-current assets. Assets related to goods circulation are classified as current assets. Receivables are otherwise classified as current assets if they are to be repaid within one year. Corresponding analogue criteria have been used for the classification of liabilities. First-year repayments on long-term receivables and liabilities are, however, not classified as current assets and current liabilities. Cost The cost of an asset comprises its purchase price, less bonuses, discounts, and similar, and plus purchase costs (shipping, import duties, non-refundable government taxes and other direct acquisition costs). For acquisitions executed in a foreign currency, the asset is recognised at the exchange rate on the transaction date. For property, plant and equipment and intangible assets, cost also includes expenses directly attributable to preparing the asset for use, for example, the cost of testing an asset. Intangible assets The expenses associated with intangible assets are recognised in the balance sheet to the extent that a future financial benefit can be identified as deriving from the development of an identifiable intangible asset and the expenses can be reliably measured. Otherwise, costs are expensed on an ongoing basis. Development costs recognised in the balance sheet are amortised on a straight-line basis over their useful economic lifetime. Property, plant and equipment Property, plant and equipment is recognised in the balance sheet and depreciated on a straight-line basis to residual value over the operating assets expected economic lifetimes. In the event of changes to the depreciation schedule, the impact is distributed over the remaining period of depreciation ( break-even method ). Maintenance costs for operating assets are expensed as incurred as operating expenses. Additions and improvements are added to the cost price of the operating asset and depreciated at the same rate as the asset. The distinction between maintenance and additions/improvements is determined in relation to the condition of the asset at the original purchase date. Impairment of non-current assets Impairment tests are performed if it is indicated that the carrying amount of a non-current asset exceeds the estimated fair value. The test is performed at the lowest level of non-current assets at which independent cash flows can be identified. If the carrying amount is higher than both the sales value and recoverable amount (net present value of future use/ownership), the asset is written down to the higher of the sales value and the recoverable amount. Previous impairments, with the exception of the impairment of goodwill, are reversed at a later period if the conditions causing the impairment are no longer present Page 13 of 22

14 Inventories Inventories are stated at the lower of cost (following the FIFO principle) and fair value. Fair value is the estimated selling price less costs of sale. Receivables Trade receivables are recognised in the balance sheet at nominal value after deduction of a provision for bad debts. The provision for bad debts is estimated on the basis of an individual assessment of each receivable. In addition, a general provision is recognised for other expected losses. Material financial problems at the customer, the likelihood that the customer will file for bankruptcy or undergo financial restructuring, or delay or default on payments are deemed to represent indicators that customer receivables need to be written down. Other receivables, both current assets and non-current assets, are recognised at the lower of nominal value and fair value. Fair value is the present value of expected future proceeds. However, when the effect of write-downs is immaterial for accounting purposes, these are not recognised. Provisions for bad debts are valued the same way as for trade receivables. Foreign currency Assets and liabilities in foreign currencies are valued at the exchange rate at the balance sheet date. Exchange gains and losses relating to sales and purchases of goods in foreign currencies are recognised as sales revenues and cost of goods sold. Liabilities Liabilities, with the exception of certain provisions, are recognised in the balance sheet at their nominal amount. Pensions The company has various pension schemes. The schemes are funded through payments to insurance companies. The company operates both defined-contribution and defined-benefit schemes. Defined-contribution plans For defined-contribution plans, the company pays contributions to an insurance company. The company has no further payment obligations once the contributions have been paid. Contributions are recognised as payroll expenses. Any prepaid contributions are recognised as an asset (pension assets) to the extent that a cash refund or a reduction in the future payments is available. Defined-benefit plans A defined-benefit plan is a pension scheme that is not a defined-contribution plan. A defined-benefit plan is normally a pension scheme that defines the benefit an employee will receive on retirement. Pension payments are normally dependent on several factors such as age, number of years service with the company and salary. The liability recognised in the balance sheet in respect of defined-benefit pension schemes is the present value of the defined-benefit obligation at the end of the reporting period less the fair value of pension assets (amounts paid to an insurance company), together with adjustments for unrecognised past-service costs. The pension liability is calculated annually by an independent actuary using a linear accrual method. Changes to the pension plan are expensed over the expected remaining vesting period. The same applies to estimate differences due to new information or changes in the actuarial assumptions, if they exceed 10 per cent of the larger of the pension liabilities and pension funds (corridor). Taxes The tax expense in the income statement comprises taxes payable and changes in deferred tax for the period. Deferred tax is calculated at prevailing tax rates based on temporary differences which exist between book and tax values, as well as any tax-related losses which are carried forward at the end of the financial year. Tax-increasing and tax-reducing temporary differences that reverse or could reverse in the same period are offset. Deferred tax assets on net tax-reducing differences which have not been eliminated and Page 14 of 22

15 tax loss carryforwards are based on estimated future earnings. Deferred tax liabilities and tax assets which can be shown in the balance sheet are presented net. Deferred tax is recognised at its nominal amount. Statement of cash flows The statement of cash flow has been prepared in accordance with the indirect method. Cash and cash equivalents comprise cash, bank deposits, and other short-term liquid investments which immediately and with minimal exchange risk can be converted into known cash amounts and have a remaining maturity of less than three months from the purchase date. Note 2 Operating revenues by country Operating revenues 2017/ /2017 Sweden 61,774,664 41,508,847 Germany 39,929,806 42,188,770 UK 30,044,343 34,837,038 Norway 28,407,817 39,898,753 Netherlands 21,663,470 13,563,017 Belgium 11,593,602 2,329,455 Switzerland 9,905,071 7,755,581 Finland 5,424,187 5,079,061 Denmark 4,648,178 6,643,635 Luxembourg 3,859,153 4,256,548 Italy 3,024,741 2,892,872 France 2,352, ,164 Austria 1,476,700 2,737,661 Other European countries 735,402 1,602,290 Other outside Europe 1,134,134 1,117,344 TOTAL 225,973, ,410,872 Note 3 Salaries, number of employees, remuneration, employee loans, etc. Salaries and payroll costs 2017/ /2017 Salaries, holiday pay and directors fees 15,335,264 16,284,455 Employer s national insurance contributions 1,850,071 1,804,140 Pension expenses 1,119, ,411 Other benefits 406, ,636 Total 18,710,751 19,492,642 Number of full-time equivalents Salary and remuneration paid to the Managing Director The Managing Director received a salary of NOK 1,994,159 and other remuneration of NOK 16,541. The Managing Director is covered by the company s pension scheme and estimated pension premiums paid on his behalf in 2017 amounted to NOK 119,423. Page 15 of 22

16 Directors fees Directors fees paid totalled NOK 625,001. Auditor Auditor s fees comprised the following: 2017/ /2017 Statutory audit 105, ,300 Tax consultancy (incl. technical assistance with tax returns) 12,900 12,500 Expenditure/Other assistance 0 0 Auditor s fees recognised in income statement 118, ,800 Employee loans No loans have been extended to and no security has been pledged on behalf of employees, the Managing Director, Board Chair, Board members or other related parties. The Managing Director has the right to severance pay equal to one year s basic salary should the Board deem it necessary to terminate his employment relationship. All employees have a bonus agreement. Bonuses are calculated based on a percentage of basic salary and are partly linked to the company s operating result and partly to target achievement in line with the company s strategies, action plans and objectives. Based on achieved results and other targets, a provision of NOK 548,819 has been recognised for bonuses for the 2017/2018 accounting year (including social security costs). Note 4 Operating assets Operating assets IT and website Op. equipment, furniture etc. Total non-current assets Cost 1 Feb ,081,483 1,054,613 2,136,096 Additions to operating assets 1,599,768 59,102 1,658,870 Disposals of operating assets 0-284, ,230 Cost Jan ,681, ,485 3,510,736 Accumulated depreciation as of 31 Jan , ,850 1,308,591 Book value as of 31 Jan ,020, ,635 2,202,145 Depr. for the year 280, , ,032 Useful economic lifetime 3 5 years 3 5 years Depreciation method Straight-line Straight-line Note 5 Inventories The company purchases certificates for its own inventories. These are valued at the lower of cost and net realisable value as of 31 January. 31 Jan Jan 2017 Guarantees of Origin 3,395,393 9,874,385 I-RECs 338,785 Electricity certificates 0 45,668 Inventories 3,734,178 9,920,053 Page 16 of 22

17 Guarantees of Origin and electricity certificates must be sold before they mature, which is 12 months after the production date for Guarantees of Origin and by the end of 2035 for electricity certificates. All certificates are expected to be sold before they mature. Note 6 Pension expenses, assets and liabilities The company is obliged to operate an occupational pension scheme in accordance with the Norwegian Act on Mandatory Occupational Pension Schemes. The company s pension schemes satisfy the requirements laid down in this legislation. A total of 14 employees are covered by the pension schemes, which grant the right to defined future benefits. These obligations are covered through an insurance company. The company changed its pension scheme as of 1 January 2011 from a defined-benefit scheme to a defined-contribution scheme. Defined-contribution pension The amount expensed for the contribution pension scheme during the financial year was NOK 963,823. Defined-benefit pension 2017/ /2017 Present value of accrued pension entitlements for the year 0 0 Interest expense on pension liabilities 295, ,595 Return on pension assets -378, ,827 Estimate changes recognised in income statement 0 0 Administration expenses 26,992 23,556 Employer s national insurance contributions on net pension expenses including admin. expense -7,967-3,197 Plan changes recognised in income statement 0 0 Net pension expense incl. employer s national insurance contributions -64,473-25,873 Accrued pension liabilities as of 31 Jan. 12,147,727 11,495,276 Pension assets as of 31 Jan. 11,348,817 10,661,092 Net pension liabilities as of 31 Jan. 798, ,184 Estimate deviations not recognised in income statement -197, ,348 Employer s national insurance contributions 112, ,620 Net pension obligations incl. employer s national insurance contributions 714, ,456 Financial assumptions: 2017/ /2017 Discount rate 2.40% 2.60% Expected salary increase 2.50% 2.50% Expected adjustment to National Insurance Scheme s Basic Amount (G)/pension adjustment 2.25% 2.25% Expected return on pension fund assets 4.10% 3.60 % Page 17 of 22

18 Note 7 Leases The company leases offices. The lease cost for reporting period amounted to NOK 1,349,013. The lease expires on 31 December 2022 Note 8 Branch office in Switzerland The company has set up a branch office in Nyon in Switzerland, where it has rented premises since September Two staff were employed at the office as of 31 January A total of NOK 4,537,760 was recognised as operating expenses for the business in Switzerland in the reporting period. Note 9 Restricted funds / Overdraft facility / Credit facility Restricted funds comprise tax deductions in the amount of NOK 475,616 and rental deposits of 679,487. The company has a bank overdraft agreement with DNB with a limit of NOK 5,000,000, This is a revolving credit facility which is renewed one year at a time. The interest rate is one-month NIBOR per cent on the amount drawn. The annual fee is 0.8 per cent of the credit limit. Note 10 Tax Taxes are recognised as expenses as they are incurred, i.e. the tax expense is based on the accounting profit/loss before tax. The tax expense comprises taxes payable (tax on the year s taxable income) and changes in net deferred tax. The tax expense is allocated to the ordinary result and the result of extraordinary items in accordance with the tax basis. Breakdown of and change in deferred tax assets Temporary differences Change 31 Jan Jan Operating assets -22, , ,211 Provisions Receivables -132,297-40,000 92,297 Inventories 600, ,000 Pension liabilities 97, , ,456 Net temporary differences 542, ,229-1,427,370 Losses and remuneration carried forward Basis for deferred tax assets in balance sheet 542, ,229-1,427,370 Deferred tax assets in the financial statements 138, , ,569 Basis for tax expenses, changes in deferred tax assets and tax 31 Jan. 31 Jan payable 2018 Profit before tax 3,703,113 7,365,821 Permanent differences 22, Basis of tax expenses for the year 3,725,552 7,365,586 Change in differences that form the basis for deferred tax assets -542, ,110 Change in tax loss carryforward 0 0 Taxable income (basis for tax payable in the balance sheet) 3,183,411 7,589,696 Distribution of the tax expense Tax payable (23 per cent of basis for tax payable on the income 732,184 1,897,424 statement) Over-, under-provision in previous year -232,408 0 Page 18 of 22

19 Total tax payable 499,776 2,130,276 Change in deferred tax assets 130,114-56,027 Change in deferred tax assets deriving from changed tax rates 8,852 14,274 Tax expense (23 per cent of the basis for tax expense for the year) 638,742 1,855,670 Tax payable in the balance sheet Tax payable per income tax expense 732,184 1,897,424 Tax payable, not offset 1,821,527 2,107,158 Tax payable in the balance sheet 2,553,711 4,004,582 Note 11 Equity Share capital Share premium Other equity Total Equity 31 Jan ,413,725 2,586,300 16,882,387 25,882,412 Net profit for the year 3,064,371 3,064,371 Proposed dividend Equity ,413,725 2,586,300 19,946,758 28,946,783 Note 12 Share capital and shareholder information Ownership structure ECOHZ AS s shareholders as of 31 January 2018 were as follows: Number of shares Shareholding Share of votes Strawberry Equities AS 130, % 50.91% Eidsiva Vannkraft AS 31, % 12.44% TrønderEnergi Kraft AS 31, % 12.44% Nordisk Industriutvikling AS 30, % 11.77% Troms Kraft Strøm AS 25, % 9.95% Troms Kraft AS 6, % 2.49% Total number of shares 256, % % The company has one share category and all shares confer equal voting rights. The share capital in the company comprises NOK 6,413,725 divided into 256,549 shares, each with a nominal value of NOK 25. ECOHZ financial statements are included in the consolidated financial statements of Strawberry Holding AS, Frederik Stangs gate 22-24, NO-0264 Oslo. Note 13 Trade receivables The company experiences high seasonal sales variations: more than 36 per cent of operating revenues were invoiced after 1 January As of 31 January 2018, a bad debt provision was recognised in the amount of NOK 40,000. No bad debts were recognised in the reporting period. Page 19 of 22

20 Note 14 Other current liabilities A provision of NOK 16,278,897 was recognised in other current liabilities as of 31 January 2018 for goods delivered but for which an invoice had not yet been received from the supplier at the balance sheet date. Note 15 Transactions with related parties Remuneration paid to senior executives is described in Note 3. Several of the company s shareholders are energy companies that both buy and sell Guarantees of Origin and electricity certificates themselves or through associates. The company s transactions relating to Guarantees of Origin, electricity certificates and services to related parties during the period 1 February January 2018 and balances as of 31 January 2018 were as follows: Sale of goods and services 2017/ /2017 Sale of goods to associates 4,560,120 3,392,515 Sale of services to associates 1,206, ,946 Total 5,766,246 4,293,461 Purchase of goods and services 2017/ /2017 Purchase of goods from associates 14,625,750 7,226,491 Total 14,625,750 7,226,491 Net balance with related parties 31 Jan Jan Trade receivables 401,331 2,049,102 Trade payables 4,829,678 1,613,493 Page 20 of 22

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22 ECOHZ AS Rådhusgata 23 N-0158 Oslo Norway ecohz.com Page 22 of 22